User-driven mobile payments

Tools

User-driven mobile payments are far more complex than vendor-driven mobile payments, and in order for any of them to succeed, several things must happen. First, users will need to be educated on what mobile payments are and what benefits in their case (if any) there are to using them. Second, businesses will need to see enough of a demand to invest in the technology to process these mobile payments. An Isis or Google (NASDAQ:GOOG) Wallet kiosk is useless without customers using it to purchase goods. If a merchant does invest in kiosks, the devices may pay for themselves. Third, the market needs to consolidate. There are dozens of m-payment initiatives with similar goals. A user is far less likely to pay via mobile if he or she needs to download multiple apps or is restricted to certain stores, geographic regions or devices.

NFC

NFC-enabled phone

Another issue is Near Field Communications. Google Wallet and Isis both require NFC-capable phones. Google Wallet is currently supported on 12 devices, from Sprint and U.S. Cellular, up from one device a year ago. Isis is compatible with 19 different handsets from Verizon Wireless (NYSE:VZ), AT&T (NYSE:T) and T-Mobile USA.

"We need to keep in mind especially that when it comes to NFC, we need to educate the people, the merchants, etc. The ecosystem needs to grow," explained Holger Kunkat, general manager of the Americas & EMEA for C-SAM, which provides the back-end technology for mobile payment solutions including Isis.

Google vs. Isis

Isis and Google Wallet each have their own advantages. Isis currently has a broader reach because it works with more handsets and carriers than Google. However, Isis is still limited to its pilot cities, Salt Lake City and Austin, Texas. Visitors, tourists and frequent travelers are all going to be weary of adopting this technology.

"While there will be multiple mobile commerce offerings, we believe Isis' open and inclusive strategy offers the scale, security and consumer choice necessary to drive widespread adoption of mobile commerce. We're open to working with all industry players, including merchants, banks and brands," said an Isis spokesperson in an interview with Fierce.

Isis Mobile Payments

Isis 

Holland remains bullish on NFC. "The bigger question is if NFC--the technology that enables Isis and Google Wallet--will succeed," Holland said. "My answer is yes, but long-term and not necessarily for payments."

In addition, there needs to be an incentive for users to pay using one of these user-driven mobile payment methods. To get users onboard, either the business or company providing the mobile payments service will need to make paying via mobile more attractive. There are a lot of options to make this work--discounts, customer loyalty points, etc.—but it's another investment that someone will need to make. Google Wallet understands this and incorporates offers and loyalty cards into its mobile wallet.

Others, however, are not as understanding.

 "The NFC payments debate will slowly die in 2013. Is tapping a phone on a terminal any easier than swiping a credit card? I don't think so --it's not solving a real consumer problem and it's not providing additional value to encourage me (or anyone else for that matter) to change my behavior," wrote PayPal President David Marcus earlier this year on the company's blog.

Support for NFC, with or without Apple

Currently, Apple does not sell devices with an NFC chip. And since iOS devices make up about one-third of smartphones in the U.S., NFC could remain on the sidelines without Apple's support. The companies banking on NFC, however, aren't worried. Bill Gajda, Visa's global head of mobile product, recently told Fierce that NFC holds the best chance of making mobile payments become mainstream. He sees widespread adoption happening within the next two to three years.

Google Wallet

Google Wallet

Google is similarly optimistic. "We realize we're just taking the first steps with the NFC Google Wallet, and it plays a crucial role in achieving this vision. We believe NFC is a great product experience and we are fully committed to the technology." explained a Google spokesperson in an email with Fierce.

What it boils down to is that users will not adopt this technology without an incentive and smaller businesses will not support these options without the guarantee that they will succeed.

"There are over 200,000 merchant locations where you can pay with your NFC-enabled phone. We fully expect this number to increase substantially, worldwide over the next three to five years when NFC payments with the phone will become commonplace," said Google.

Whether Google Wallet and Isis succeed remains to be seen. If NFC does catch on, these are the players most likely to find success. Google's Android controls the lion's share of the smartphone market, with a 53.7 percent market share according to comScore. Similarly, triumvirate Isis has the benefit of the large customer base of its parent companies.

Questions surround MCX

Another contender is MCX, the merchant customer exchange, a consortium of retailers looking to create their own open mobile payments network. There are few details about how this payment system would work for users or vendors, but it already has the backing of some of the country's largest retailers including Walmart, Target, Lowe's and Publix. Walmart alone pulls in about $447 billion in revenue per year, with customers spending $36 million per week. The retail giant nixed its partnerships with Google Wallet and Isis in October.

At the time, Walmart Vice President and Assistant Treasurer Mike Cook stated "I may be wrong; we may see it, but I don't think [NFC is] becoming a technology that will handle payments."

MCX may or may not use NFC payments and since little is known, it could turn out to more closely follow a different mobile payment model.  the question that remains is not if payments will include a smart device in the future, but how.